Economic assessment in the RMA context
In two recent hearings, the evidence of experts in economic geography has been challenged on the grounds that geography is not proper economics, and that someone with qualifications in economic geography cannot be considered an “economist”. This claim re-surfaces every now and then. It is in line with the mantra that to be an “economist” one must have a qualification in economics, and anyone else is a “non-economist”, with the term even stated in formal evidence.
It seems most common when the expert “economist” discovers their evidence is not stacking up well against that of someone with different knowledge of an economy, especially where a project is being examined in line with Resource Management Act (RMA) requirements to consider economic and social and cultural and environmental effects. Some feel the incentive to attack the credentials of the expert, instead of trying to deal with the merits of the case, since inevitably some mud will stick.
As always, start with the fundamentals. First, we work under the RMA. Our main resource is land, together with water and air (the bio-geosphere), plus the built resources, and people. How resources are used determines most of the effects of concern to the RMA, which sets the focus for most of the decision-making required from the Courts, hearing panels and councils. The large majority of hearings relate to land use.
The use of land and other resources is driven by the economics of that use, as people generally seek to achieve good outcomes (benefits) from their action, and avoid bad outcomes (costs). At its core, Economics is about why people act as they do, as households and as businesses. Understanding peoples’ behaviours and decision-making is a big part of Economics. Equally, it is a core aspect of Geography. As a discipline, Geography generally seeks to explain economic activity on the surface of earth (among many other things). In RMA terms, it is about understanding the likely outcomes of resource use (especially land use), by understanding the core economics of such use.
This places Economic Geography as a basic discipline for resource management. Economic geographers’ understanding of the economics of resource use is a core expertise, for providing advice to the Courts, Panels and councils. That ability to understand and interpret the outcomes of resource use, especially likely future outcomes is based on knowledge of the economics of land and resource use, learned through economic geography, and the study of the geography of economies.
Terminology and common usage are important. The university structure usually has entire faculties and departments of Economics and Geography. There is major overlap between Economic Geography and Economics, but Geography is a wide discipline and not all about the economics of peoples activity. Economics covers a lot of areas, including but not limited to many which are covered by Economic Geography. Inside that area of overlap, there is substantial common ground. A major part of Economic Geography is economics because it is the study of economic activity, with focus on explaining land and resource use and people activity in terms of the underlying core economic processes. In the same way, significant parts of Economics cover the same ground as Economic Geography, albeit usually with limited emphasis on the importance of location and time.
All that said, even given the overlap, and the major commonalities, the disciplines are not identical. And the overlap is often not fully appreciated by the Court or hearings commissioners, who may not be fully familiar with the scope of both disciplines – which is exacerbated when someone with a qualification in economics is willing to term someone with a different qualification as a “non-economist”.
Two responses spring to mind. One is the London School of Economics (LSE), which has addressed the matter in a quite practical way, by terming Economic Geography as “Spatial Economics”. In the 1990s, when tasked with explaining the major variations in the performance of cities and land markets, LSE recognised that the standard tools of economics were failing to deal with the effects of location, and sought the expertise to do this. The Spatial Economics Research Centre (SERC) was set up, headed with five chairs of Economic Geography, rather than Economics. The SERC is part of the Economic Geography cluster, which “integrates spatial and urban economists with more institutionally-oriented economic geographers … and is a key player in facilitating interaction between economic geography, as practiced by geographers, and a resurgent geographical economics, as practiced by economists.” The SERC’s key research areas include “the impacts of geographical and regulatory supply constraints on housing costs and price and rent dynamics … how urban land markets and their regulation impact consumption and welfare … how can we evaluate the economic effects of spatial urban policies“. These are all important matters in the New Zealand context, and they are being addressed through the discipline of Economic Geography.
In parallel, it is useful to simply identify the matters of relevance to the RMA, identify the core skills required to address these matters, and consider whether an expert with a qualification in Economic Geography has the capability to examine them. The nexus is that under the RMA and its s32 requirements to assess the benefits and costs, which means that all matters should be subject to an “economic” assessment, as identified by Judge Jackson in the Marlborough Ridge decision “The Court noted that there is a distinctive thread in the RMA which takes an "economic" approach to sustainable management of natural and physical resources… If economics is about the use of resources generally then resource management can be seen as a subset of economics. Bearing that in mind will prevent unnecessary debates as to whether the use of the word "efficiency" in the RMA is about "economic" efficiencies or some other kind. All aspects of efficiency are "economic" by definition.”[1]
This is very important. It means that economic assessment describes the core s32 approach, and not the (tertiary) qualification of the assessor. This means the economic assessment should be founded on the core skills of the expert, irrespective of whether their degree is in Economics or Transport or Hydrology. Or Economic Geography. Because the expert is tasked with applying the s32’s economic approach in a systematic evaluation of the benefits and costs of policies or provisions.
It is unfortunate that this is not properly appreciated by those looking to undermine an expert’s qualifications to provide evidence simply because their degree is not in economics. That approach betrays a basic misunderstanding of the nature of the RMA, and particularly s32. It highlights the importance of making sure lawyers are up to speed, lest they feel somehow apologetic about using an economic geographer instead of a ‘proper economist’.
[1] Marlborough Ridge Limited vs Marlborough District Council. Decision Number C111/97. October 1997